A sharp decline in cryptocurrencies on Monday has pushed Bitcoin close to its lowest level since 2020, as investor sentiment has been hit by a wave of monetary tightening that is set to begin in Europe this week and spread to the United States.
The value of Bitcoin fell sharply today, with the largest digital token sinking as much as 7.4%. Ethereum also fell sharply, shedding up to 6.6%. Other coins like XRP and Polkadot posted even heavier losses.
Investors are preparing for increased volatility from the Federal Reserve's expected interest rate hike on Wednesday. Higher borrowing costs are reducing the liquidity available to the crypto sector, and US equity futures are indicating caution.
In an inflationary environment, macroeconomic factors are more important than anything else, according to Antoni Trenchev, managing partner at crypto lender Nexo.
Ether, the second-largest cryptocurrency, is currently at a two-month low. The coin experienced a jump in mid-June, due to hype around an upgrade of the Ethereum blockchain that was designed to reduce energy usage. However, now that the upgrade is complete, the coin is slowly returning to its original value.
The price of EthereumPOW, a token representing the legacy computing operations of the Ethereum blockchain that chose not to participate in a recent software update, continued to tumble today. According to CoinGecko data, the price of the token was down 40% as of press time.
The XRP token affiliated with Ripple Labs Inc. was among the biggest decliners today, shedding as much as 13.5%. This comes amid reports that the firm and the US Securities & Exchange Commission prefer an immediate ruling in a court case over whether Ripple was “reckless” in claiming XRP isn’t a regulated security.
The value of digital tokens has dropped by more than $70 billion in the past 24 hours, according to CoinGecko figures. This is a significant decrease from the $3 trillion peak in 2021. The reasons for this decrease include tightening financial conditions and blowups at leveraged crypto firms.
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